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Analysts anticipate Vodafone Idea to settle all vendor dues by FY26

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In Short:

Vodafone Idea (Vi) plans to clear vendor dues in next fiscal year, boost ARPU through tariff hikes after elections. Need capital infusion, liabilities waiver, and tariff hikes to survive according to analysts. Raised funds from FPO and debt funding for network upgrades and subscriber retention. Vi focusing on converting 2G to 4G users to increase ARPU. Government support needed for spectrum payment liabilities.

Vodafone Idea (Vi) Forecasts Clearing Vendor Dues in Next Fiscal Year

Vodafone Idea (Vi) is aiming to settle all vendor dues in the upcoming fiscal year. The telecom company plans to enhance its average revenue per user (ARPU) through various tariff increases post-elections and rapid conversions from 2G to 4G, according to recent discussions with the company’s management and analysts.

Financial Outlook and Challenges

The recent Rs 18,000 crore follow-on public offer (FPO) provided much-needed relief for Vi, positioning the company on track to sustain its operations. However, analysts point out that Vi still requires capital infusion, liabilities waiver, and further tariff adjustments to ensure long-term survival.

According to Citi Research, the funds raised will primarily support Vi’s capital expenditure needs, and the company is optimistic about settling all existing vendor dues by FY26.

Debt and Network Upgrade

Vi’s management indicated that proceeds from the recent FPO and a proposed Rs 25,000 crore debt funding would facilitate network enhancements, which are crucial to addressing subscriber losses. The company plans to allocate over 70% of the targeted Rs 45,000 crore for capital expenditures, with a significant portion reserved for 4G expansion and 5G rollouts.

Vi is focused on migrating 2G subscribers to 4G to boost ARPU. The company aims to replicate Bharti Airtel’s network upgrade strategy, with substantial investments planned for 4G expansion and 5G deployments.

Liabilities and Regulatory Obligations

Analysts emphasize the importance of addressing Vi’s substantial liabilities, particularly related to spectrum payments and gross revenue dues. Government support through measures like conversion, extension, relief, or waiver is deemed necessary to ensure Vi’s financial sustainability.

While Vi’s recent initiatives have positioned the company for progress, challenges related to regulatory obligations remain a concern. Analysts stress the need for sustainable solutions to Vi’s financial obligations for long-term viability.

Shares of Vi closed 2.67% higher at Rs 12.71 Wednesday on the BSE, reflecting investor optimism following recent developments.

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